Debt sustainability and Africa’s true potential
(The Citizen March 5, 2023)
- In order for Africa to fully become autonomous across all spheres, there needs to be a grand strategy on how to build economic capacity by using local resources rather than depending on global partners
Debt sustainability is fundamental. It is the fabric that keeps economies intact. In fact, history has taught us that if any country is to become a global superpower, military superiority alone will not get the job done. It requires economic capability to dominate the global stage.
Alas, that is why Africa has for the largest part of the developments been left out of the global decision making stage. This did not happen by chance. Africa has found itself in a tight corner, where economic dependency immediately took over from colonialism.
After years of suffering under colonial masters, where all aspects of life were dictated by foreigners, the continent failed to fully emancipate itself and exert total autonomy.
This led to what later became known as neocolonialism. And today we find ourselves in peculiar circumstances where decisions for development are being made on our behalf under the disguise of cooperation.
It is for these reasons and more that we urge the Tanzanian government to exercise the utmost prudence when deliberating on applying for a loan from commercial banks, international organizations, or foreign countries.
It is good to have ambitions for growth. Granted, building an entire economy does not come cheap. However, the cost of the ambitious plans should not outweigh the benefits; this is a basic principle.
As economic policy professor Stefan Dercon once said, “Africa should not embark on too many big, capital-intensive infrastructure projects simultaneously.” Doing so will strain resources and make the government resort to borrowing more in order to complete the projects? With Tanzania’s national debt rising by close to Sh7 trillion in one year, the indicators, at least as shared by the government, are that the debt remains sustainable.
However, what should be of paramount importance is ensuring that the borrowing spree is not stretched too far as to overwhelm the national capacity when it comes to repaying what we owe.
With some suggesting that Tanzania is in fact on the brink of debt distress, it becomes even more prudent for the government to exercise caution when it comes to borrowing.
Indeed, concessional loans are more appealing than private sector commercial loans. They attract a paltry of the interest. But, if left unchecked, these loans can also weigh down an economy due to the subtle nature of the interest rate and the long grace periods.
In order for Africa, and Tanzania in particular, to fully become autonomous across all spheres, there needs to be a grand strategy on how to build economic capacity by using local resources rather than depending on global partners.
This is one of the ways to ensure Africa’s future is not determined by anyone else but Africans.
It takes time to reach that level. But it is a prospect that can be achieved if African governments are serious about ridding the continent of external influences, especially financial dependence.